Iranian Oil and Petrodollars Are Real Threat to U.S., Not Iran's Nuclear Program

A nuclear-armed Iran would be a game-changer in Middle Eastern politics. Having two (potentially) belligerent nuclear states is disastrous; one causes enough headaches as it is.

Thankfully, contrary to the opinions of rabble-rousing hawks in Washington and Tel Aviv, there is no solid, irrefutable proof that Iran is actively pursuing a nuclear arms program. (Nuclear fuel is another matter.) And if intelligence agencies and nuclear watchdogs can agree that a nuclear-armed Iran remains an implausible – if nightmarish – scenario, surely those bellicose politicos who call for war know that as well.

In all likelihood, they do but they nevertheless call for “preemptive strikes.” That’s because Iran doesn’t pose a nuclear – or even a military – threat. The reason why Iran gets pulses racing is economics.

Current intelligence concurs that Iran is processing nuclear fuel but is not – in an active way – pursuing a nuclear arms program. Iranian military capabilities are also somewhat limited, incapable of even following through on their oft-repeated threat to “close the Straits of Hormuz” and starve the global economy of Middle Eastern energy. Brushing aside the mad, eschatological rhetoric of Iran’s figurehead president – so beloved of Western commentators but largely impotent – Iran lacks the essential capacity to commit mass-scale violence to any of its neighbors and potential adversaries.

However, Iran is under severe and near-constant threat from America and her Middle Eastern allies. Not only is Iran engaged in (and losing) a shadow war – waged on the internet and by Le Carre-esque spy cells – it is straining under Western sanctions, and hemmed in by American airbases in Central Asia and the US Fifth Fleet in Bahrain. Unlike the fear-mongering exaggeration of Iran’s potential for destruction, the Iranian regime – and, potentially, thousands of innocent Iranians – actually is under existential threat from an all-out American-led attack.

So why go through this entire, painful charade to build Iran up as the overwhelming menace to world peace? It’s not even about oil but about how we pay for oil.

As an energy exporter, Iran is at the whim of global supply and demand, raking in a tidy profit on the open market. Until quite recently, most Iranian energy trades were conducted with U.S. dollars. That is until 2008, when the Iranian Oil Bourse opened and Iran began demanding payments in non-dollar currencies.

Trading in dollars confers great economic advantages to America, especially when dealing with volatile energy markets. Without needing to negotiate variable exchange rates and worry inflation, American agencies and businesses could conduct trades on more favorable terms – the petrodollar provided added stability to frequently skittish markets.

Iran threatens to disrupt that privileged pattern. As a major exporter and producer of energy, Iran stands as one of the most prominent dominos in the global energy supply chain. Iranian exports fuel the factories of Asia – from Mumbai to Tokyo – and is a key link in the development of the Third World. But Iran refuses to play ball with the Atlantic Alliance, switching from dollars and euros, to rubles, rials, and rupees.

If the trend continues – and it will – virtually all foreign trade linked with Iran – through its wide network of trading partners across the developing world – will exclude the U.S. dollar and the Euro.

If we follow the money, this presents a significant turning point for the Western world. When casino capitalism has shaken the West to its economic core – Europe may collapse soon; “quantitative easing” balloons the US debt – the last thing the Atlantic world needs is a challenge from Iran. Instead, Iran has zeroed in on the West’s vulnerability. And Iran is turning the screw.

Washington fired back with new rounds of sanctions, threatening third countries with the same sorts of restrictions should they continue to deal with Iran. These are half-hearted at best: Having been isolated by the West for decades, Iran already sells the majority of its exports to the growing appetites of Asia. Meanwhile, key Asian allies – who depend more on Iran than the West ever will – are already seeking exemptions to American-led sanctions. If it isn’t already apparent, Washington and Brussels must realize that their array of options is shrinking and ineffectual.

Which leads us to Washington and Tel Aviv’s current round of saber-rattling and shadow conflict. Iran could never pose a serious military threat to America – or even Israel – but it can challenge the Atlantic economy. Instead, Iran, with impressive flexibility, challenges American dominance on the markets. And it is – in a manner of speaking – “winning.” Given the financial crisis that has stretched the Western world, the U.S. is in no shape to fight an economic war but it can still flex its military muscle.

However, a military response to an economic crisis is not only employing the bluntest of blunt instruments to a delicate, surgical operation, it’s also the very definition of international bullying.

And for those of you who are still unconvinced, consider this: Saddam Hussein’s Iraq – trumped up as being the “next big threat” – dropped the petrodollar in 2000. Less than three years later, Baghdad fell. Iraq, in many ways, posed the same “danger” to America back then that Iran supposedly does today. The parallels are uncanny and terrifying.

Photo Credit: Wikimedia Commons